Thank you for inviting me to this conference. It was quoted earlier that India and China by themselves are more then 1/3rd of the world population. 4 countries account for 43% of world population. If you take GDP or GNP figures the total world GDP was last year 38 terra dollars, terra meaning thousand of billions, and the size of BRICs was 10% of that 3.7 terra dollars. This is in nominal exchange terms but if you correct it as was quoted earlier by purchasing power parities then you can establish that the share of world GDP of these countries. It’s almost one quarter of total and after this correction China is already the second world economy and India the fourth, Brazil the 9th and Russia the 10th. These are also the fastest expanding economies in the world today. China has lastingly upheld growth rate of 8 to 10%. Some say more then 10%. India has stepped up its growth rate and is now about 7 to 8% yearly, Brazil 4 to 5%, Russia about 7% after very severe downfall in the early 1990’s but picking up later on and still more today of course with the high oil prices.

The prospects are very strong. I would say that China will be the world leader even earlier then what Goldman Sacks predicts, I would say by 2035 rather then by 2040. but in any case it is going to happen and India will supersede the EU by 2040. so this is about one generation from today. As is known the BRICs are major contributors to world trade about 15% of a total 8 terra dollars of world trade is already in the hands of the BRICs. They have good share of world current account surpluses, which finance mostly the huge current account deficit run by the US. You know the US deficit is today more then 700 billion dollars. China, Russia have surpluses of about 60 to 70 billion dollars, Brazil about 35, India is just little above 0 but taken globally the BRICs are important financiers of the current account deficit run by the G7 countries. If you take FDI, which amounts to about 6 to 700 billion dollars yearly, the share of BRICs is about 15% of that with large differences. China alone accounts for 10%, Brazil, Russia 2 or 3%, India still very low.

Foreign exchange reserves, BRICs taken together account for 1.4 terra dollars with China alone having 850 billion dollars reserves, taken together the BRICs have about 40% of world total of exchange reserves which comes to about the same as their share in the world population by the way.

Of course this is the BRICs, taking the 4 countries alone and as has been said also this category should probably be expanded. Who are the obvious candidates to be come new BRICs or BRIC-SAT or BRIC-SAM as our colleague from IMF said Mexico certainly which has the same GNP as Brazil, Korea an industrialized country, both these countries are already members of OECD. There are more dubious cases, Tayland, Malaysia, Endonesia and South Africa, Egypt, Argentina all these are potential countries to become BRICs and in fact the most obvious 3rd candidate is Turkey itself. Turkey is already OECD member has a sizable economy however to become a BRIC Turkey has to overcome two problems. First, size. The country by itself is still relatively small and you should note that an important factor all four BRIC countries are continent size economies. The smallest of them all is India in terms of square kilometers about 3 million. That’s more then 3 times of Turkey. And of course if you take population size then the relation is still much more in favor of countries like China or India. But the sheer size of the economy is a very important factor and that can only be held of course by having closer relations with one’s neighbors. The second important factor is the confidence factor and there Turkey still has to wipe out the memories of crises, which happened 4 years ago in November 2001 with an economic slump with very high capital outflows and with massive devaluation of the Lira and rescheduling of the debt.

Now, the next question is, what should Turkey do to interact better with BRICs which was the question asked. First the geographic position is obviously an important factor. It is easier for Turkey to interact with Russia, which is a neighbor with a very long history of conflict or cooperation depending on the period with Turkey. Brazil is far away, is more difficult. China has long standing relations via the Silk Road with Turkey. And India is probably also an important partner in the concept of large Mid-East region extending that far. One should know that two BRICs are already among Turkey’s leading trade partners. Russia is the second trade partner of Turkey and China the fourth. So there is already strong interaction with them.

What should be done? Expand free trade arrangements to compensate the size problems. Free trade arrangements with the EU of course, with neighboring countries, Turkish speaking countries of he Middle East and former Soviet Union members. And with the BRICs. Reminding everyone that China is already the 3rd world importer today it is clear that exchanges with these countries should be developed.

Another important factor is the continuation of the improving governance, renovation of the legal system, rule of law, well functioning courts, cooperation between state and religion, which is private matter. Negotiation with the partners such as the EU, it is a long process but it is a very important process by the progress it brings along the road. This will help to attract more FDI in Turkey itself. There are already a large number of subsidiaries producing in Turkey, there should be more and there probably the reform of the Lira which happened last year will help a lot as will good security for foreign investors and freedom of capital movement.

Another important factor of course is mastering the fundamentals. Inflation, which in one BRIC country destroyed successively 3 currencies and is also big problem in Russia and was a big problem in Turkey, this must be mastered. The debt problem, getting out of the debt problem by economic growth, very successful case of that is Korea. Sound fiscal policies and a stronger current account and lastly as was said by our Chinese colleague, productivity and innovation are the central factor of stronger growth and on road to becoming a BRIC.

My conclusion is simple and straightforward; the best way for Turkey to interact with BRICs is to become a BRIC herself. Thank you very much.


Question: AÜ Siyasal Bilgiler Fakültesi, İktisat bölümü. Ben tüm konuşmacılara sormak istiyorum. Yaptığımız analizlerde altında yatan temel bir varsayım var. Finansal piyasaların tıkır tıkır işleyeceği. Yani finansal piyasalardaki herhangi bir kırılganlık bu süreci altüst edebilir. Yani ülkelerin potansiyelleri gerçekleşmeyebilir. Beni bu konuda tedirgin eden bir şey var. Amerika’nın 10 yıldan bu yana sürdürdüğü büyük cari açıklar. Bu cari açıklar sürdürülebilir değil ve acaba kaç yıl daha Amerika bu kadar cari açık vererek, dünya tasarrufunu emecek? Çünkü diğer ülkelerin büyüme potansiyelini bir nevi çalmış oluyor. Merak ettiğim, dünyanın en büyük ekonomisi olan Amerikan ekonomisi acaba Ponzi oyunu mu oynuyor?

Answer: If I may try to answer partly your question, it is true that there is huge discrepancy between savings rate and current account situations between the US and the rest of the world. I would not concur in saying that they are destroying world’s growth by doing that. I would rather say that many economists say that they are in fact sustaining helping the growth of the rest of the world by assuming these large deficits. They are as one might say the last resort and of course it will have to stop one day and there we have prices looming because they haven’t taken the necessary steps yet and when they do which will inevitably happen it will hurt. But precisely as long as they don’t do it they are in fact contributing to world growth and there is sort of hidden agreement and perhaps an unwilling agreement but a real one between countries like China and the US. China has sets bringing high circumstances to US and financing it by training bounce.  As long as at both sides the US is willing to have a deficit China is willing to finance it. If China has growth  so paradigm will have change, there will have to be more internal growth in China and by the way also in Japan and Germany, in countries running high surpluses and there will have to be more savings and less deficit in the US. Nobody knows yet whether that process will be an orderly of the current account deficit of the US of the dollar and so on or a crash. This is yet not seen, nothing inevitable.